Caldwell v. Davis

1. The relation existing between partners is one of trust and confidence. When dealing with each other in relation to partnership matters they are required to make full disclosure of all material facts within their knowledge in any way relating to the partnership affairs.

2. To entitle a party to the protection accorded to privileged communications, the communications must have been made to the counsel, solicitor or attorney acting, for the time being, in the character of a legal adviser, and must be made by the client for the purpose of professional advice or aid upon the subject of his rights and liabilities. The numerous assignments of error will not be separately discussed; but, under a general consideration of the case, the rulings of the court below, upon which the errors are assigned, will be passed upon.

The first and most important question for consideration is that of the sufficiency of the evidence to entitle the appellant to the relief demanded. Appellant bases his right of relief upon the conduct of the appellee; and how far the conduct of the appellee affects such right must be determined by the relations of the parties to each other. The plaintiff alleges that they were copartners for the purpose of buying and selling an option on certain mining claims. Under the decision inKayser v. Maugham, 8 Colo. 232, the evidence in this case fully establishes the allegation. The relation existing between partners is one of trust and confidence. Pom. Eq. 963. Partners, when dealing with each other in relation to partnership matters, are required to make full disclosure of all material facts within their knowledge, in any way relating to the partnership affairs. A community of interest exists between the partners, and a community of interest-produces a community of duty. This community of interest, by the terms of the bond and the agreement of the parties, was to continue until the 22d day of July. The bond having been obtained for the purpose of selling the option so acquired at a profit, for the joint benefit of appellant and appellee, a joint duty and obligation rested upon each, during the full time the bond had to run, to work for the accomplishment of such purpose. We think the evidence clearly shows that appellee did not perform this duty; that, prior to appellant's return from the east, appellee had negotiated a sale to Ohlwiler of one-half interest in the property for his own exclusive benefit; that he deliberately planned to obtain appellant's interest in the bond to enable him to carry out his negotiations with Ohlwiler; that he intentionally concealed from appellant all knowledge of his negotiations with Ohlwiler, and he led appellant to believe that he wanted appellant's interest in the bond for the sole purpose of enabling him to put up the money and take the property.

In Story, Eq. § 329a, it is said: " When the contract is between those who sustain, or have lately sustained, any intimate and confidential relation, the law presumes the existence of that superiority and influence on the one part, and that confidence and dependence on the other, which is the natural result of the relation, and will accordingly decree the cancellation of the contract, unless it appear affirmatively to have been equal and just." In the making of this contract the parties were not on equal footing. Davis had knowledge of facts relating to the sale of the property which Caldwell did not have, and which knowledge equity and fair dealing required of him to disclose to Caldwell, because such knowledge was obtained under circumstances which made it the common property of himself and Caldwell. The concealment of, or the failure to disclose, these facts to Caldwell made Davis guilty of an actual fraud. Pom. Eq. Jur. § 901; Story, Eq. Jur. § 308; Dambmann v. Schulting, 75 N.Y. 55, 61.

The contract between Davis and Caldwell was unequal in that it enabled Davis to obtain all the benefits under their joint undertaking, and unjust in that such benefits were so obtained by reason of the suppression by Davis of facts which it was his duty to disclose.

In Fitzsimmons v. Joslin, 21 Vt. 129, 138, Redfield, J., in commenting upon conduct of this nature says: " Can it be said, then, that when one party acts under a misconception of the facts most material to the contract, which are known to the other party and studiously kept back, knowing that the other side is acting under this delusion, can it be said that such contract is binding at the bar of conscience, or, indeed, in moral or legal justice? I trust not."

In making the sale to Davis Caldwell was acting under misconception of most material facts. He was led to believe that a joint sale for the joint benefit of himself and Davis could not be made at a time when the only impediment in the way of a complete sale for the joint benefit of the parties was the desire and intention of Davis to obtain the full benefits of such sale for himself alone. Davis was under a legal as well as a moral duty and obligation to place Caldwell in possession of all information he had obtained relating to the sale or probable sale of the bonded property, during the existence of the copartnership, before he attempted to contract with Caldwell for his interest; and because of his failure to perform this duty and obligation the contract should be canceled.

The evidence fails to disclose such laches on the part of plaintiff in the bringing of his suit as will defeat his right to relief.

The question of tender is met by the allegations of the complaint that plaintiff offers to pay to the defendant, his copartner, what, if anything, should be found due from plaintiff to defendant upon an accounting and settlement of the partnership affairs, and demanding that such accounting be had, and charging the fact to be that the defendant will be found to be his debtor on such accounting. If in fact the defendant is indebted to the plaintiff in a sum equal to the amount defendant paid for the assignment of plaintiff's interest, we see no reason why the court of equity should require a further tender to be made. Watts v. White, 13 Cal. 321.

The question of laches by the plaintiff in bringing his suit was made an issue by the pleadings, and the seventh, eighth, ninth and tenth assignments of error are based upon the rulings of the court in the rejection of the testimony offered by the plaintiff upon this issue. There was no exception to the ruling of the court upon which the eighth assignment is based. In view of our conclusions upon another branch of the case, it is not necessary to discuss these assignments. The question of laches must be determined upon the knowledge of the plaintiff, and his diligence in obtaining knowledge of the facts upon which his right to relief rests. There was no such laches on his part as will defeat his right to relief.

The errors assigned upon the ruling of the court in rejecting testimony of the witness Letcher may all be considered together; the objection to each of the questions being based upon the proposition that the matter inquired about consisted of privileged communications by Davis, as client, to Letcher as his attorney. It appears from the evidence that Davis went to Letcher between the 7th and 10th days of July, 1880, with one of the Nortous and Mr. Rutan, at which time Letcher drew a release of warranty from Davis to the Nortons and Rutan, or to one of them, and that afterwards he drew a deed, and examined the title to the bonded property. Letcher further says that he presumes the deed he drew was the result of conversation had between Davis, Ohlwiler, Rutan and the Nortons at his office. To entitle a party to the protection accorded to privileged communications, the communications must have been made to the counsel, attorney or solicitor acting, for the time being, in the character of legal adviser, and must be made by the client for the purpose of professional advice or aid upon the subject of his rights and liabilities. 1 Greenl. Ev. §§ 239, 240. The evidence does not show that any communications had been made by Davis to Letcher, as his legal adviser, upon the subject of his rights and liabilities. The only employment of Letcher by Davis was to draw the release and deed. In drawing these instruments Letcher acted as a scrivener merely, bringing this case directly within the ruling inMachette v. Wanless, 2 Colo. 169, 179. In this case, as in Machette v.Wanless, the evidence does not show that Letcher was an attorney.

The witness was questioned as to the conversation between Davis and other persons in his presence, concerning matters not relating to his employment, and which were not communications made to him, and as to which no confidence was reposed in him. The court erred in sustaining the objections made to the questions put to the witness Letcher, excepting the one upon which the fourteenth assignment is based.

The judgment should be reversed and the cause remanded in conformity with the views herein expressed.

We concur: MACON, C.; STALLCUP, C.

PER CURIAM.

For the reasons assigned in the foregoing opinion the judgment of the district court is reversed and the cause remanded.

Reversed.